Past Due Balance Method

Definition of 'Past Due Balance Method'


A system for calculating interest charges based on any outstanding loan or credit charges that remain unpaid after a certain date. The past due balance method is used by credit companies whereby credit card holders have until a specified date to pay balances off before beginning to accrue interest fees. For example, if a credit card holder uses their card for daily purchases, the credit card company will offer a grace period during which no interest accrues. If balances are paid by this date, no interest accrues; if balances or a portion of the balance is not paid by this date, interest will begin to accrue.

Investopedia explains 'Past Due Balance Method'


Credit card companies use the past due balance method because it would be impractical to use a credit card and pay interest immediately on purchases. This method allows balances to remain unpaid until a specified due date, after which the balance would start to accrue interest. Balances on credit cards typically become due once each month and after this date the balance becomes past due, thus the past due balance method.


Filed Under: ,

Related Video for 'Past Due Balance Method'

comments powered by Disqus
Hot Definitions
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  2. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  3. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  4. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  5. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  6. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
Trading Center